In a recent development following the fight against internal consumption within the production sector, China’s steel industry has now put forward measures to combat internal consumption in the circulation sector. The aim is to curb price wars, boost company profits, and revive struggling businesses. However, in the first quarter of this year, the profit margin of key steel enterprises was nearly zero. Since the second quarter, several steel-related companies have either filed for bankruptcy or have been declared bankrupt by the court, leading to an accelerated pace of corporate insolvency. This highlights the slow progress and lackluster effectiveness of the anti-internal consumption efforts in the steel industry amid a long-standing downturn in the real estate market.
On June 16, the Circulation Branch of the China Iron and Steel Industry Association, in conjunction with over 40 provincial and municipal steel trade industry associations nationwide, jointly released the “Initiative for Anti-Internal Consumption in the Steel Circulation Industry.” The initiative aims to combat practices like dumping at low prices, bidding at a loss, and cutthroat competition. This marks the extension of the anti-internal consumption efforts in the Chinese steel industry from the production end to the circulation end.
Veteran media analyst Mike Li explained that the Chinese steel industry has long been in a state of “low profits or losses,” with many companies surviving based on scale rather than profit, often resulting in price wars and internal consumption.
The severe long-term overcapacity in the Chinese steel industry is primarily concentrated in low-end common steel products with extremely low profits and intense price competition, such as common rebar, construction steel plates, and steel pipes. Over the past twenty years, China’s economy has been mainly driven by the real estate and infrastructure sectors. However, with the changing landscape leading to a real estate collapse and a subsequent decline in domestic steel demand, the progress of anti-internal consumption efforts in the steel industry has been slow and ineffective.
Over recent years, real estate development and construction activities in China have significantly contracted. According to data from the National Bureau of Statistics of China, from January to May of this year, national real estate development investment decreased by 16.2% year-on-year, construction areas of real estate enterprises dropped by 12.3%, and newly started construction areas decreased by 22.6%.
The steel industry’s “anti-internal consumption” and capacity control in the production sector have long been underway. In June 2025, the Chinese Ministry of Industry and Information Technology issued a new version of the “Implementation Measures for Capacity Replacement in the Steel Industry.” This policy requires a unified increase in the ratio of iron and steel production capacity replacement to no less than 1.5:1 nationwide. This stringent policy, known as the “strictest ever,” signifies the fourth revision following the editions in 2015, 2017, and 2021.
Mike pointed out that the elimination of outdated production capacity by the Chinese authorities has been slow due to the heavy burden on local governments for employment and GDP evaluation. Many small and medium-sized enterprises are struggling to comply with Beijing’s capacity reduction policies, leading to the persistence of “zombie capacities” that neither fully operate nor die out.
He believes that compared to the capacity replacement in the production sector, the anti-internal consumption measures in the steel circulation field are mostly formal without binding enforcement. It is merely an initiative and may yield even poorer results.
The initial intention behind China’s introduction of the anti-internal consumption measures in the steel industry last year was to curb price wars, increase company profits, and sustain business operations. However, the number of bankruptcies among steel companies has been on the rise, with the steel industry’s profit margin almost hitting zero in the first quarter of this year, further declining compared to 2025. This demonstrates the challenges and inefficacies of the anti-internal consumption policies in the steel industry.
A search on the “National Enterprise Bankruptcy and Reorganization Information Network” using the keyword “steel” revealed a total of 39 bankruptcy-related cases published by the courts since April 1, 2026. Since January 1, 2025, there have been 230 cases, including both steel enterprises in the production sector and steel trading companies in the circulation sector.
In the past month, there have been at least six cases of steel industry companies applying for bankruptcy, as widely reported by the media. These include Hongda Steel Co., Ltd. in Anyang City, and several steel trading companies in Wuxi City, among others.
The severe impact of these bankruptcy cases has been felt across multiple provinces and cities, including Shandong, Shanxi, Hebei, Jiangsu, and Xinjiang. From the consolidation and reorganization of 51 affiliated companies of Taishan Iron and Steel to the liquidation of three steel-related companies in Tangshan, the bankruptcy and liquidation of steel enterprises in China are picking up pace.
From July 2025 to April 2026, Taishan Iron and Steel and its 51 affiliated companies underwent substantial consolidation and reorganization, with Shiheng Special Steel holding an 80% stake with an investment of 3 billion yuan, currently in the stage of debt repayment and operational integration.
Companies like Hua Tong Steel in Fengnan District, Tangshan Chie Jiaohua in Tangshan, and two other affiliated enterprises went through bankruptcy liquidation due to mixed personnel, financial, and asset operations. Furthermore, Hua Yuan Stainless Steel and Hua Yuan Metallurgy, both related companies in Xingtai, were declared bankrupt and merged for liquidation.
According to the Metallurgical Information Equipment Network, from early 2025 to April this year, more than 20 steel and related companies in China have entered bankruptcy, reorganization, or liquidation procedures, impacting various provinces and cities. From consolidating 51 affiliated enterprises of Taishan Iron and Steel to liquidating three related companies in Tangshan, the pace of bankruptcy and liquidation in Chinese steel enterprises is rapidly increasing.
The China Iron and Steel Association (referred to as “CISA”) reported that in the first quarter of 2026, key statistical steel enterprises in China accumulated operating income of 1.485 trillion yuan, with a total profit of 21.7 billion yuan. However, the main steel business profit was only 1.03 billion yuan, a sharp 85.6% year-on-year decline, with the profit margin plummeting to 0.1%.
“CISA” noted that the decline in iron production, crude steel, and steel output in China in the first quarter of 2026, coupled with a less-than-expected recovery in end demand, high volatility in raw material costs, and increasing external geopolitical conflicts and trade barriers, has led to an unresolved contradiction of oversupply in the industry. The profit margins of enterprises have been severely squeezed, resulting in a substantial decline in steel industry profits year-on-year.
The steel enterprises in China have been teetering on the edge of losses for a long time. Data from “CISA” indicated that the profit margin of the Chinese steel industry was 0.7% in 2023, a mere 0.71% in 2024, and an average profit margin of 1.9% for key statistical steel enterprises in 2025.
Taking the case of the leading steel producer in Northeast China, “Bensteel Plate” (a listed company packaging core assets under Bensteel Group) as an example, the company has been posting massive losses in recent years. Public financial data shows staggering losses: 12 billion in 2022, 17 billion in 2023, 50 billion in 2024, and 39 billion in 2025, totaling up to 118 billion in cumulative losses, leading the company into a cycle of losses.
Economic analyst David Huang, currently residing in the United States, conducted a deep analysis of the underlying reasons behind the bankruptcy of Chinese steel mills and its subsequent impacts.
He mentioned that the widespread bankruptcies in the Chinese steel industry are a microcosm of the planned economy model’s failure and a typical case of the inevitable failure of a planned economy. Similar to the shared bicycle industry in the past and the current so-called new energy vehicle industry, many enterprises are destined to close down massively.
The wave of bankruptcies in the steel mills will first lead to a significant rise in unemployment, which will have a major impact on the financial sector. Since many steel mills are listed companies, their bankruptcies will affect China’s stock and financial markets, leading to an increase in non-performing bank assets.